After nearly two years of steadily weakening finances and belt-tightening, governments across the nation are running into conflicts with their employees, and it stretches far beyond the looming shutdown of New York City's buses and subways.

Threatened layoffs, strike warnings, demands for concessions, protracted contract negotiations - all are brewing in small towns, big cities and state capitals as governments face the most difficult economic landscape in decades.

New York's potential transit strike may be the most dramatic example, but the rocky labor situation spreads across the country - to sewer plant workers in Duluth, teachers in Pennsylvania and thousands of state workers in Connecticut.

After a year where states saw budget shortfalls estimated at $50 billion, forecasters say the current fiscal year is shaping up to be nearly as bad. The National Governors Association says this year's shortfall could hit $40 billion.

"Rather than facing up to the reality that revenues are inadequate to sustain services, governments are going after public employees," said Kerri Korpi at the American Federation of State, County and Municipal Employees, which represents 1.3 million workers.

"Our folks didn't really benefit tremendously during the economic boom times," said Korpi, the union's director of research and collective bargaining. "They were getting largely mediocre raises, barely holding their own when you consider benefits."

But government leaders say public employees simply must share the pain as programs are scaled back, budget requests are put aside and projects are delayed.

Boston Mayor Thomas Menino, a Democrat negotiating with 7,200 workers, or nearly half the city's work force, this week warned that city employees won't be immune from cuts and can't be guaranteed a lifetime city pay check.

In Connecticut, GOP Gov. John Rowland sent out notices to lay off 2,800 state workers. Rowland hopes to cover the state's $500 million deficit with $200 million in spending cuts, $200 million in tax increases and $100 million in union concessions.

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